Paytm gets approval to add new UPI Users after 8-month ban: All we know about it

Paytm regains the ability to add new UPI users after complying with regulatory guidelines, ending an 8-month ban.

In Short

• Paytm gets NPCI approval to onboard new UPI users after an 8-month regulatory ban
• The ban was imposed due to non-compliance with data protection and risk management guidelines
• Paytm faces strict conditions for UPI operations, including enhanced risk management and customer data protection

Paytm has received approval from the National Payments Corporation of India (NPCI) to add new users to its Unified Payments Interface (UPI) platform after an 8-month ban. This approval came on October 22, 2024, following Paytm’s compliance with several regulatory guidelines. According to Paytm’s BSE filing, the company will need to adhere strictly to NPCI’s guidelines, including those concerning risk management, app branding, and customer data. The approval brings relief to Paytm, which had been unable to onboard new UPI users since early 2024 due to regulatory issues.

Why Was Paytm Banned?

The root cause of Paytm's inability to onboard new UPI users began in January 2024. The Reserve Bank of India (RBI) issued directives, citing non-compliance with certain operational guidelines as the reason. Specifically, the ban was imposed due to concerns over Paytm’s management of risk-related processes and its adherence to data protection regulations. Reports indicated that Paytm had issues with the storage of customer payment data and was not fully compliant with certain risk management practices mandated by regulatory authorities.

The move affected the company's ability to expand its UPI user base, which was crucial in the growing digital payments space. During the ban, Paytm had to focus on addressing these issues, working closely with regulatory bodies to meet the necessary standards.

How Did the Ban Affect Paytm?

Paytm’s inability to grow its user base led to a sharp decline in its market share in UPI transactions. Before the restriction, Paytm held a 13 per cent share of UPI payments. However, in the absence of new users, its market share shrank to 8 per cent. During this period, competitors like PhonePe, owned by Walmart, and Google Pay strengthened their grip on the UPI market. Together, these two players now process about 87 per cent of UPI transactions in India, leaving Paytm with a much smaller slice of the pie.

What’s Next for Paytm?

Now that the ban has been lifted, Paytm is expected to regain momentum in the UPI space. However, the approval comes with strict conditions, and Paytm will need to closely follow NPCI’s guidelines, such as ensuring better risk management, complying with customer data protection laws, and working under a multi-bank setup for its UPI transactions.

The lifting of the ban is a critical moment for Paytm, which will be eager to recover lost ground in India’s fast-growing digital payments landscape. Although it may take time for Paytm to fully catch up with competitors, the NPCI’s approval is a positive sign, offering the company a fresh opportunity to grow its UPI user base once again.